When to buy shares?

The answer is very obvious - when they are cheap. But what does it mean?
Well, first we need to understand couple of things. What drives prices up and down?
It`s herd instinct, fasion, greed, uncertainty and fear. When market is rising, everyone buys into to it, fearing they may be left out, when others are making profits. It`s not that they are ignorant, it`s rather matter of attitude or weak character.

What are shares?

Every business needs capital to get started, to expand and grow. They can raise this in various ways, but at some stage they may need more than other sources can provide.
Let`s have a look at one popular way of raising money invented by the Dutch.
It gives bankers (or other people providing money) receipt, showing that they own part of the company (in return for their money). They are not lenders anymore, they become owners. Being shareholder gives plenty of privileges, like the right to appoint directors.

QUOTED SHARES
When company gets it`s shares listed on the stock exchange, there`s a market price, constantly updated, in most of cases much higher than original investor put money in.

A share of stock is one of a number of equal parts of the capital of a company, entitling the owner to a proportion of distributed profits, well known as dividends, and to a portion of the value of the company in case of liquidation.

BLUE CHIPS
All the companies in the FTSE 100 Index are the biggest companies in the country. They are the most safe bets, because big companies are much more stable than the small ones. They hire the best managers, can fund all sorts of research, attract big customers, etc.
But we must remember no company is completelty safe; they can look really solid but they still need to be watched. As an illustration, we can look at Northern Rock and rest of the banks.